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Planning for long term care continued…
Planning for long term care continued…
There are many tools that can be used to prepare for long term care: trusts, insurance, TODs, and gift transfers during a lifetime; however, you must choose the right tools for your specific situation and you must make sure those tools are prepared correctly or you may find yourself paying criminal consequences. Currently, the medicare lookback period is 5 years; however, it is likely the government will extend it to 7 or 8 years in the near future.
From my experience, financial planners tend to encourage clients to create trusts to avoid medicare rules. This can be great advice in certain situations; however, the client must keep in mind that if s/he would like to create a trust to avoid medicare, it must be an irrevocable trust and the trustee must be someone that is not a relative. Essentially, the government requires that the client give up all control over his/her assets. Many people, (especially those with significant assets) will not give up all control over the estate they spent their entire life building. In some cases, they can’t afford to give up all control because they need to have access to the assets in the event that something happens.
Insurance is a decent option. There does exist a particular type of insurance that will protect your assets in the event that you go into a nursing home. For instance, if you purchase the coverage for $200,000, the plan will allow you to keep $200,000 in assets (meaning that you have to spend down any assets above that) and then it will cover all other costs of long term care. This is a great option if you want to be able to maintain control over your assets. Obviously, the cost will be the monthly premium. If this is an option you are interested in exploring, please speak to your financial advisor. If you don’t have one, I would be happy to refer you to one.
Another great way to reduce assets for long term care planning is to give away assets. If you have family members that you trust, you can deed real estate to them, open bank accounts in their names, and make gifts of up to $13,000 per year (without tax conseqneces). I am always hesitant to recommend that my clients do this. If you give something away, you must realize that you are doing just that: giving it away. Once you give away an asset, you must expect that the person will treat it as their own. If they comply with your wishes then that is great but you should always expect that they won’t follow your wishes because legally, they don’t have to. People have a difficult time controlling themselves when money is involved.
No matter which tools you decide to use in order to adequately plan for long term care, you must make sure that your financial advisor and your attorney communicate and work well together. Neither will be able to adequately advise you if each is not aware of what the other is doing.
Mother’s Day Gift- the gift of peace of mind
Perhaps the best gift you can get your mother (and yourself) for Mother’s Day is an estate plan. I tell my clients that it is their responsibility to make sure that their parents have estate plans. Why? Because when your parent dies, as the child, you (and your siblings) will have to organize and wrap up their affairs. You can make your job much easier and you can save a lot of money by making sure that they have a well thought out estate plan.
Estate planning does not just mean preparing a will. A good estate attorney will not only prepare a will, but will also help you decide which property should pass outside of probate by way of transfer on death designations and can prepare a living will, power of attorney and health care power of attorney in the event that the testator becomes incompetent or incapacitated.
Transfer on death designations are viewed as an easy way to save money and time because they give the beneficiaries immediate access to those assets rather than having to wait for a distribution through the probate court; however, transfer on death designations are not right for all people and all property and legal counsel should be sought before filling out any TOD paperwork.
Estate planning can keep family assets in the family in several ways. You can express your wishes about how your assets should be divided after you are no longer able to make that determination by having a will prepared. When the decedent’s wishes are expressed in a will, family members are less likely to fight over how the assets should be divided. This will cut down on attorney’s fees and court costs that would arise if there were a dispute. In addition, a testator can ask that the court waive a bond which can be costly depending on how large the estate is. TOD designations are difficult to contest successfully and any assets transferred by TOD will go to the beneficiaries regardless of whether someone contests the testate or intestate distribution in probate court.
Estate planning will not only make your life easier if the worst should happen, but it will also give your parents peace of mind that they didn’t have before; something that every parent deserves.
How to choose an attorney
There are three people in your life that you should never lie to: your doctor, your dentist, and your attorney. This morning, I heard someone say that these are the people that get lied to the most. From my experience, this is probably true and it is not a constructive use of a lie. These people are the three people that immediately know that you are lying and if we don’t know it immediately, we find out eventually. The most important aspect to a healthy attorney-client relationship is trust. Not only that the attorney trusts the client, but more importantly, that the client trusts the attorney.
An attorney can sense when a client does not trust him. Not only by the things the client does, but also by the things the client says. Don’t get me wrong, I have heard many horror stories about attorneys taking advantage of too-trusting clients, and I have respect for a healthy skepticism; however there is a difference between a healthy skepticism and distrust of the attorney. There are several ways that you can find an attorney that you trust. First of all, you should meet with more than one attorney. The purpose of meeting with several attorneys is to make sure that the one you do pick, is knowledgable in the area of your matter. Once you get a feeling for the type of discussion you should be having with your attorney, you will be more comfortable asking questions and will get more information based on your questions. You should be able to find two or three attorneys that offer free consultations to accomplish this.
Meeting with several attorneys is also good advice because you can get a feel for the different personalities of the attorneys and you can pick one that suits your style best. Another tactic that will help ensure that you find a trust-worthy attorney is to ask your friends and family members who they use for various personal legal problems. Your friends and family members can likely tell you the strengths and weaknesses of the person they use and you can more easily evaluate whether that attorney is right for you. A word of caution regarding this tactic however: you should follow your gut feeling. Just because a friend or family member had good luck with a particular attorney does not mean that the attorney is particularly knowledgeable in the area of law that your matter is in. You must meet with the attorney to find out what they know and more importantly, what they don’t know.
Do not hire an attorney that you do not trust. You do not owe anyone an explanation regarding why you chose a particular attorney. If you hire an attorney that you do not trust, you spend more time following up on matters, calling the attorney to ask questions so that you feel reassured, and generally worrying about whether the attorney is doing his job. In the long run, this will cost you more time, money, & sleepless nights for the same or similar result.
